New York Times
January 23, 1999

Robert Heilbroner: An Economic Pioneer Decries
the Modern Field's Narrow Focus

By LOUIS UCHITELLE

Ask economists in the baby boom generation why they became economists,
and any number will give some credit to Robert L. Heilbroner. His 1953
book, "The Worldly Philosophers," which has sold nearly four million copies,
is a "Profiles in Courage" of the great thinkers who shaped modern economics.
So it is somewhat surprising to find Heilbroner increasingly critical of
the economists he helped inspire. They have missed the point, he says.

Heilbroner, 79, is at one end of a growing debate over whether economics,
as practiced today, is effective. Sure, economists do a
lot of good research,
Heilbroner acknowledges. Some of it yields important insights. But their
models are too simplistic. They overlook factors that shape the economic
and social system and in doing so forfeit the deep understanding achieved
by an Adam Smith or a John Maynard Keynes, two of his worldly philosophers.

"The worldly philosophers thought their task was to model all the complexities
of an economic system -- the political, the sociological, the psychological,
the moral, the historical," Heilbroner said. "And modern economists, au
contraire, do not want so complex a vision. They favor two-dimensional
models that in trying to be scientific leave out too much and leave modern
economists without a true understanding of how the system works."

The worldly philosophers would have agreed.

"Noneconomic motives are an essential element of economic theory," Joseph
A. Schumpeter wrote in 1942, two years after Heilbroner graduated from
Harvard, where he had heard Schumpeter lecture. A few years earlier, Keynes
had said that "no part of man's nature or his institutions must lie entirely
outside an economist's regard."

Alfred Marshall, the 19th-century British economist, warned that "economics
cannot be compared with the exact physical sciences, for it deals with
the ever changing and subtle forces of human nature."

The shift from this way of thinking came after World War II, when economics
gradually ceased to be a social science and took on the techniques of a
natural science. Mathematics became the language of economics, and computer
models of the economy became the chief research tool. These models require
assumptions about the way markets and people behave, assumptions that are
often unrealistic, although in recent years economists have fed more and
more actual data into their equations in an attempt to approximate the
real world.

"If math is correctly used, then it can incorporate all kinds of things
that really make the analysis very much broader," said George Akerlof,
an economist at the University of California at Berkeley. "The best of
this new work pays attention to psychology and sociology."

That still falls short of what Heilbroner has in mind. The modern economists
separated out the subjective, often intuitive judgments that earlier economists
had considered so important. These were considered not susceptible to scientific
inquiry, not measurable.

In the process, economists also squeezed out the word capitalism, the
once traditional name for the market system, with its subjective connotation
of class struggle between owners or managers and workers and with its suggestion
of the privileges that go with various levels of wealth. The word capitalism
no longer appears in popular textbooks for Economics 101.

Explaining why, N. Gregory Mankiw, a 40-year-old Harvard economist and
author of a popular new textbook, "Principles of Economics," said: "We
make a distinction now between positive or descriptive statements that
are scientifically verifiable and normative statements that reflect values
and judgments. The question is, can you do positive economics without normative
economics. I think so."

The science of economics, for example, has found that the causes of
extreme income inequality, a relatively new phenomenon, can be objectively
measured. Those who are well educated are well paid in the American high-tech
service economy, and those who have not gone beyond high school are not
well paid. For Mankiw, that is a "positive" statement in that it is verifiable.

But left out of this finding are factors like job insecurity, which
tends to make wages more unequal -- whatever the education level -- and
labor union bargaining power, which helped to equalize wages until union
power declined. These are subjective observations that Mankiw or Paul Romer,
a 43-year-old Stanford University economist, would classify as political
or public policy issues but not part of a scientific explanation of the
workings of the economic system.

"There was a kind of a hubris among earlier generations of economists
who thought they themselves could make the scientific statements and then
the value judgments," Romer said.

He likens an economist's role to that of a doctor who explains what
will happen if a cancer patient is taken off an aggressive program of chemotherapy
and radiation. "You can let the pastor, the legislator, the family and
the philosopher struggle with the moral question of whether to actually
stop the treatment," Romer said, "but what you want from a doctor is correct
scientific statements about what will happen if."

Keynes made no such distinctions. Drawing on intuition, observation
and his own broad experience, he concluded that the nation found itself
stuck in the 1930s Depression in large part because business refused to
invest, although the nation offered plenty of savings to finance investment.
Keynes' sweeping insight forever changed the way economists think about
the way a capitalist system functions. Keynes, having found the problem,
saw no reason to be shy about solutions, calling for enormous government
spending to offset the decline in business investment.

"Keynes certainly had a view of what was a good society," said Robert
M. Solow, a Nobel laureate in economics at the Massachusetts Institute
of Technology. "And he tried to save society from itself."

Modern economists reject such a role. Romer's father, Roy Romer, the
former governor of Colorado, had to decide while in office whether to cut
taxes or spend more on education, a value judgment properly left to politicians,
in the son's view. "I saw my father as someone very skilled at what he
does," the son said. "I have sought to be as skilled on the scientific
side."

The father chose more education, partly on the advice of his son, who
told him of the economic profession's scientific finding that income inequality
is a result of unequal education.

But in this sort of a case, science does not take you far enough, says
Heilbroner, an economic historian at the New School for Social Research.
"You have to ask, what is the correlation between high levels of education
and high levels of wealth." he said. "Is education in our system a privilege
of wealth and a function of the class structure?"

These are questions that science cannot address but economics must,
says Mark Blaug, an economic historian. Otherwise economic findings are
skewed. "There are so many things going on in the economic world at the
same time," he said. "Not just standard economic forces, but all the other
elements that shape an economy -- politics, morals, psychology, sociology
-- and therefore economics will always be vague and imprecise, more like
history than math."

Going beyond science sits easier with older economists like Heilbroner
or Blaug, who is 71, or Solow, who is 74, and like Heilbroner and Blaug
came of age as an economist in the 1950s, while Keynesianism was still
in its heyday and the Cold War had not yet helped squeeze value judgments
out of economics.

Solow, however, is a pillar of mainstream economics. His economic growth
theory, in which he explained the interactions of capital, labor and technology
in generating economic expansion, is a model of economics practiced as
a science. He would never, he said, "advise a student to go to work on
the nature of the class structure."

"You are condemning him to failure," he continued. "We do not know if
there are applicable rules."

Yet in an autobiographical sketch, he argued against thinking of economics
as science with a capital S. "That is perfectly consistent," he wrote,
"with a strong belief that economics should try very hard to be scientific
with a small s. By that I mean only that we should think logically and
respect fact." Fact, he said, should be enlarged "to include, say, the
opinions and casual generalizations of experts and market participants,
attitudinal surveys, institutional regularities, even our judgments of
plausibility. My preferred image is the vacuum cleaner, not the microscope."

Gradually economics is moving this way. The younger generation, while
holding tight to its scientific approach, is nevertheless opening up its
equations, feeding into them all sorts of new data from other disciplines,
then trying, more than in the past, to make the hypotheses fit the data.
Surveys are increasingly being used, and old assumptions -- that supply
and demand, for example, balance at a healthy level -- are being amended
or put aside.

The new approach was on display at the recent annual meeting of the
American Economics Association, where economists at one session reviewed
their research into today's unusual spectacle of an unemployment rate and
an inflation rate falling together instead of moving in opposite directions,
as economic theory dictates and as they once did. Drawing on psychology,
the researchers even tried to quantify how people actually behave or feel
about work.

Heilbroner applauds. But it is not in his view enough. The questions
that absorb the younger economists are too narrow, he says.

Economists, for example, cannot just chronicle the rise of output as
an economy grows. There must also be a judgment about the quality of that
output: Does it show up as more school construction or warmer clothing
in winter or as more channels of bad television programs and higher pay
for chief executives. That is how the worldly philosophers would have thought,
Heilbroner suggests in a new chapter added to the seventh edition of "The
Worldly Philosophers," to be published in the spring by Simon & Schuster.

"Economics will not, and should not, become a political torch that lights
our way into the future," he writes, "but it can and should become the
source of an awareness of ways by which a capitalist structure can broaden
its motivations, increase its flexibility and develop its social morale."